By the time that this piece appears, we may know whether or not the OFT has referred the grocery market to the Competition Commission for an investigation. I think it is safe to say that there will be uproar should the referral not take place, although the multiples’ PR machines are already hard at work trying to prove that it is unnecessary. We live in an age where exaggeration is the norm, but I firmly believe that this is a once in a lifetime opportunity for our sector. Both ACS and FWD have worked enormously hard, and against an intransigent OFT, to achieve this result, but important and encouraging as it is, it is only the first step on a long road.
We know that the market is not working with anything like a level playing field. This is not because we are commercially ineffective, but because of the special nature of the multiples direct access to the consumer, which is multiplied with every percentage point of market share – the ultimate virtuous circle, as long as your company is Tesco, Asda, Sainsbury’s or Morrisons. In contrast wholesalers are distributors of products which retailers wish to buy, and do not have the same power to use and abuse the suppliers of those products.
With the increasing quality of the convenience offering in the independent sector our customers could offer real consumer choice and real competition to the multiples. It is a fact that with access to a price regime which genuinely reflected only true economies of scale, the lower gross margin requirements of independent operators would give the multiples a real run for their money. The competition commission review of 2000 accepted that there are market inequalities but decided these were to the consumers’ benefit. How restricted must consumer choice become before it is not in the consumers’ interests to have a complex monopoly?
Some people have doubts about whether we can achieve change in this area. Nobody should pretend that this will be an easy battle to win – the resources available to our opponents, and their access to the levers of power, are immense. However not only is right on our side, but there is an increasing suspicion on the part of the public about the wisdom of Tesco-isation. I urge every wholesaler to take up the challenge on behalf of their business and those of their customers. We have a duty to commit the finance and resources to ensure that we present the strongest possible case when the referral is confirmed.